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Investment – Transaction volume (including commercial assets over US$10 million and excluding pure land sales) surged by 329% q-o-q to HK$101.6 billion, bringing the annual total for 2017 to HK$181.6 billion. Both figures marked record highs. Demand for Grade A offices was driven by end-users and local investors.

Grade A Office – Leasing momentum picked up in Q4 2017, with net absorption rising to 603,900 sq. ft., almost double the 381,500 sq. ft. recorded in Q3 2017. Banking and financial firms, in particular Chinese institutions, continued to drive leasing demand in the CBD.

Retail – The quarter saw the completion of several major renewals in prime locations, while the further recovery in luxury goods sales and tourist arrivals prompted some expansion by local watch and jewellery chains. High street rents fell by 3.2% y-o-y, the lowest rate of decline since 2015, reflecting the more optimistic leasing sentiment.

Investment – We expect to see more transactions involving Chinese investors forming joint ventures with experienced offshore partners. Grade B office premises will remain keenly sought after by institutional investors and we expect to see more buildings of this type converted for co-working and co-living use.

Grade A Office – As more new supply becomes available in non-core office submarkets, we expect decentralization to remain a prominent trend. Returned space in core office submarkets will likely be backfilled by small-to-medium sized financial firms. Co-working centers will continue to expand.

Retail – While e-commerce has not significantly impacted bricks-and-mortar retailers in Hong Kong, the growing focus on omni-channel sales is set to drive demand for smaller shops. In the absence of a stronger rebound in total retail sales, rents are forecast to be stable this year.

Industrial – The improving outlook for global trade and a stabilizing retail market is forecast to support further growth in warehouse demand. Leasing activity will be driven by companies engaged in e-commerce, technology-related trades and high value products.

Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.